Asset Allocation Loss Ratio (AALR) – What Is It & How Does It Help You?
Unconventional Wisdom · Ed Rempel
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Show Notes
Asset Allocation Loss Ratio (AALR) – What Is It & How Does It Help You?
When you go to any investment firm in Canada, they require you to sign a risk tolerance questionnaire to prevent you from investing too aggressively.
However there are two important questions:
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What prevents you from investing too conservatively?
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Can you achieve your life goals with more conservative investments?
These are critical questions, since almost nobody can retire comfortably with a typical balanced portfolio with 40-50% in bonds.
This is where the AALR comes in. With any financial decision, it's important to understand how it affects your life – both the risk & the return.
The Asset Allocation Loss Ratio (AALR) estimates the effect of a more conservative portfolio or suboptimal asset allocation on your long-term investment returns.
In my latest podcast episode I give you examples of case studies, as well as the formula for asset allocation loss ratio, so you can determine exactly how you should invest for your future.